Sutton Group Realty Systems Inc. Brokerage . 416-896-3333 . 905-896-3333

HST Update as of June 22, 2009 

hst tax on housingWhile the new Harmonized Sales Tax (HST) has not yet come into effect, home buyers and sellers should keep an eye on the provincial governments progress.   The main objective is to combine the current 8% Provincial sales tax with the 5% federal GST tax, creating a new 13% harmonized tax - the new HST tax.

In June 2009 the provincial government announced some proposed changes to the way it will handle the HST on the purchase price of "newly" constructed housing.  Again, this is not yet in effect, and if passed it will not begin until July 1, 2010.

New Housing Rebates - Who will pay this new tax?

• HST will not apply on the purchase price of re-sale homes.
• HST will however apply to services such as moving cost, legal fees, home inspection fees, and REALTOR® commissions. 

Yes this tax will affect resale properties indirectly with the additional costs added to the services associated with buying and selling a home.   So it's not just a concern for "new home" buyers.

When looking to purchase a new home, consideration will need to be given to more closing costs on services as well as an additional price tag on the sale price. 

After a lot of debate and opposition from the real estate boards the provincial government reconsidered some of the application of the new HST tax.

QUICK FACTS

    -------------------------------------------------------------------------
                        Table 1: HST and Resale Homes
    -------------------------------------------------------------------------
                                      Current Tax                           HST Tax
    Taxable Service           Payable          New Taxes          Payable
    -------------------------------------------------------------------------
    Mortgage Insurance
     Premiums(1)                 $752.40        $470.25(2)          $1222.65
    -------------------------------------------------------------------------
    Legal Costs                    $50.00          $80.00                $130.00
    -------------------------------------------------------------------------
    Real Estate
     Fee/Commission           $720.00-        $1,152.00-        $1,872.00-
                                        $1,080.00         $1,728.00       $2,808.00(3)
    -------------------------------------------------------------------------
    Home Inspection           $20.00            $32.00          $52.00
    -------------------------------------------------------------------------
    Title Insurance             $24.00            $15.00          $39.00
    -------------------------------------------------------------------------
    Total New Tax:                                  $1,749.25-
                                                 $2,325.25
    -------------------------------------------------------------------------

The Cost for "New" Housing (not applicable to resale):
Under the new proposal, all price ranges would receive a 75 percent rebate on the provincial portion of the single sales tax on the first $400,000. up to a maximum rebate of $24,000.
For new homes under $400,000 therefore would not be subject to this additional new tax.

Its a race again, reminds me of the day when the provincial government introduced the Toronto Land Transfer tax.  There was a flurry of sales taking place to beat the deadline and save on the tax.
The new HST tax will not apply to sales of new homes where ownership or possession is transfered before July 1st, 2010.

Again, these details are only in the proposed stage.  If you are interested in more details kindly visit the provincial government site.

If you have a question, give us at a call at our Toronto Sutton Office 416-896-3333 or check back to our blog for further updates as we receive them.

For a resale house priced at $360,000, a HST could add over two thousand dollars in new taxes to closing costs. In total, a HST will add $313 million annually in new taxes to resale home transactions.
   
"In the last decade, Ontario's homeowners have faced a barrage of new costs," said Aunger. "From municipal land transfer taxes to sky rocketing property taxes, homeowners are being pushed to the brink to accommodate
increasing demands from government. A harmonized sales tax is yet another cash grab on Ontario's already overtaxed homeowners."
 

    -   Ontario's real estate industry is essential to the provincial
        economy. In 2008, real estate in Ontario accounted for $56.6 billion
        in sales, $6.01 billion in ancillary economic spending and $1.35
        billion(4) in land transfer tax revenue to the provincial government.
        In addition, real estate employs 110,000 Ontarians directly and
        indirectly.(5)

    (1) CMHC premium of 2.75% for mortgage with a 5% down payment on a
        $300,000+ home.
    (2) Consumers currently pay the 8% PST on mortgage insurance premiums.
    (3) Real estate commissions are negotiable or may be a flat fee.
        Estimated range of 4% to 6% used.
    (4) Ministry of Finance, Public Accounts, 2007/2008.
    (5) Altus Group, "Economic Impact of MLS(R) Home Sales," June 12, 2007.